On Risk Capital and Testing Ideas That Can Go to Scale

From Luis Ubiñas, Ford Foundation: “Philanthropy’s resources are modest when compared with the complex problems we seek to solve. So foundations must act strategically — providing ‘risk capital’ to test ideas and demonstrate new solutions that can be brought to scale through partnerships with government and business.”

Public dollars will produce significantly higher returns on investments when programs have been nurtured, or rejected, on a small scale by philanthropy, then supported over time. We lack processes across systems to incubate, grow, monitor, and sustain quality.

Combining resources from foundations, government, and businesses is the best model I’ve seen for weathering the ebb and flow of funding streams. Each entity brings valuable ideas to the table that improve service delivery systems. Relying on only one funding source is program suicide.

This is a popular notion among foundations now, and I think it’s a good one, as long as it’s not the only one. We need to consider the importance of supporting small, effective, ground-level nonprofit efforts that cannot be served by government and should not be scaled up.

Philanthropy needs to stay edgy and do the courageous work that governments wouldn’t touch with a 10-foot pole because of polls, elections, and constituent backlash.

The idea of “risk capital” is great — something foundations can do with their more nimble governance structures and different calculation of institutional risk. The idea of scale-ready solutions, however, is the toughest nut to crack.

Takeaways are critical, bite-sized resources either excerpted from our guides or written by GrantCraft using the guide's research data or themes post-publication. Attribution is given if the takeaway is a quotation.